London based, and Kuwaiti owned, Jade Merchant Bank (“JMB”) continued to invest successfully in UK real estate during the pandemic. Their Investment Director, Stuart Jarvis, reviews their lessons learned.
Real Estate remains a people and a relationship led industry, which was made all the more challenging when meeting those people in person became a proscribed activity. JMB’s first Lockdown deal was the entirely ‘off-market’ acquisition of the £29m BAE Systems campus in Christchurch, Devon, for a UAE based family office. Heavy reliance was put on previously forged relationships, which allowed both buyer and seller to work collegially through the complexities of the acquisition process.
Analysis of Real Estate changed undeniably during the pandemic, with the new question of whether the investment was ‘Covid proof’? With BAE Systems plc on the lease, the acquisition benefitted from a FTSE 100 tenant with a £17.5bn market capitalisation and long-term government contracts. Hindsight was not required to see the value here.
The most striking ingredient to this transaction’s financial success was the role of leverage. More specifically, the Libor swap market. At the time of writing, 5 year swaps for both Libor and Sonia are priced at c. 1.1 - 1.2%. At the time of closing the acquisition, they priced at c. 0.15%. With inflation being the hot topic for 2022 and beyond, locking in this swap rate looks an increasingly smart move.
The next acquisition for JMB in the Covid-19 era was the £53m Tesco Extra supermarket in Oldham, Manchester. Against the backdrop of shuttered shops across the UK, the supermarket sector was open for business and trading strongly. Lockdowns had catalysed the move to online fulfilment for the Retail sector, dramatically softening yields for Retail premises and sharpening those in the Logistics sector. Supermarkets found themselves at the profitable nexus of being well located in town centres to provide their own last mile logistics hub and using their own store as hybrid storage and fulfilment centres.
This GCC investor was making their debut UK investment, which underscores the belief they put in the JMB team. Yields for this asset class have continued to compress since the transaction closed and we remain confident that this acquisition will perform well in their portfolio.
The final transaction of the year was the re-financing a portfolio of High Street retail stores for a GCC client. The fundamentals of the portfolio remained strong, despite the difficult trading conditions. The core locations in regional town centres means there are multiple alternative use scenarios. The tenant remains a brand name in UK retail and has weathered the Covid storm well. This was a pleasing outcome to end the year.
Having navigated the challenging investment conditions well, the JMB team look forward to a postCovid investment market but still based on relationships, recognising the opportunities of the day and maintaining an unwavering focus on the investment fundamentals.
-Ends-
For more information, please contact
Stuart Jarvis
Investment Director
Jade Merchant Bank LLP
3rd Floor, 33 St. James’s Street, London SW1A 1HD
www.jademerchantbank.co.uk
For media enquiries, please contact
Stuart Fieldhouse
Hawksmoor Partners
36 Spital Square, 4th Floor, London, E1 6DY
stuart@hawksmoorpartners.com
© Press Release 2022
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